Wells Fargo Bank, N.A. v. Wasserman

• Decision Date: 28 September 2012
• Docket Number: No. CA 10–061–M.,CA 10–061–M.
• Citation: 893 F.Supp.2d 310
• Parties: WELLS FARGO BANK, N.A., as Successor Trustee for the Holders of Bank of America Commercial Mortgage Inc. Commercial Mortgage Pass–Through Certificates, Series 2004–4, by and through its special servicer, Orix Capital Markets, LLC, Plaintiffs, v. Bernard WASSERMAN, David Wasserman, and Richard Wasserman, Defendants.
• Court: U.S. District Court — District of Rhode Island

893 F.Supp.2d 310

WELLS FARGO BANK, N.A., as Successor Trustee for the Holders of Bank of America Commercial Mortgage Inc. Commercial Mortgage Pass–Through Certificates, Series 2004–4, by and through its special servicer, Orix Capital Markets, LLC, Plaintiffs,

v.Bernard WASSERMAN, David Wasserman, and Richard Wasserman, Defendants.

No. CA 10–061–M.

United States District Court, D. Rhode Island.

Sept. 28, 2012.

Armando E. Batastini, Nixon Peabody LLP, Providence, RI, Jeff Joyce, Joyce, McFarland & McFarland LLP, Houston, TX, for Plaintiffs.

Anthony M. Traini, Barbara Harris, Joshua Teverow, Joshua Teverow, Esq. Ltd., Providence, RI, for Defendants.

MEMORANDUM AND ORDER

JOHN J. McCONNELL, JR., District Judge.

Before the Court are three motions for summary judgment: (1) Plaintiff Wells Fargo Bank's Motion for Summary Judgment (ECF No. 56); (2) Defendants Bernard Wasserman, David Wasserman, and Richard Wasserman's Motion for Summary Judgment (ECF No. 70); and (3) Defendants David Wasserman and Richard Wasserman's Motion for Partial Summary Judgment. (ECF No. 72.) For reasons discussed below, (1) Plaintiff's Motion for Summary Judgment is DENIED; (2) Defendants' Motion for Summary Judgment is DENIED; and (3) Defendants' Motion for Partial Summary Judgment is DENIED.

I. FACTS

This dispute arises from a loan made to a Rhode Island limited liability corporation, WREC Precision Park LLC (“WREC”). (ECF No. 56–1 at 1–2.) Defendants, Bernard Wasserman (“Bernard”), David Wasserman (“David”), and Richard Wasserman (“Richard”) ¹ (collectively, “the Wassermans”), are each associated with WREC: Bernard is a partial owner of WREC in his individual capacity; David is the majority owner of DDW Precision Park Holdings LLC (“DDW”), with DDW a partial owner of WREC; and Richard is the majority owner of RNW Precision Park Holdings LLC (“RNW”), with RNW another partial owner of WREC. (ECF No. 59–7 at 24.)

In August 2003, WREC and the initial lender, Bank of America, N.A. (“BOA”), entered into a loan agreement for over twenty million dollars (“the Loan”) to purchase realty located at 200 Frenchtown Rd., North Kingstown, Rhode Island, known as Precision Park. (ECF No. 56–1 at 2–3.) The Promissory Note, Mortgage, and Loan Agreement (collectively, “the Loan Agreement”), containing the terms and conditions of the Loan, were secured by a mortgage (“the Mortgage”) on two lots in North Kingstown, Rhode Island (“the Property”). Id. The Property was WREC's only asset. Id.

All three Wassermans signed the Loan Agreement. (ECF No. 59–7 at 21.) Bernard signed twice: once, under the heading of “Borrower,” as the president of the borrower, WREC, and again under the heading of “Borrower Principal,” above his full printed name and the clause as “an Individual.” Id. David and Richard also signed below the heading “Borrower Principal,” above a line with their full printed name and “an Individual.” Id. Finally, the Loan Agreement included a chart entitled “Organizational Chart—Post–Property Transfer” (“Organizational Chart”) laying out the “Borrower Ownership Equity Structure.” (ECF No. 59–7 at 23–24.) The Organizational Chart shows six individuals or entities with direct ownership interests in WREC: Bernard; Christopher D. Leahey; Matthew B. Wina; Gerald B. Lavallee; DDW; and RNW. Id. at 24. To clarify the ownership structure of DDW and RNW, the Organizational Chart adds another level showing David and an irrevocable trust as owners of DDW, and Richard and an irrevocable trust as owners of RNW. Id. Thus, the Organizational Chart identifies David and Richard's indirect ownership interest in WREC.

On October 1, 2004, the Loan was “ ‘securitized’ into a financial product that became a form of equity known as ... Commercial Mortgage Pass–Through Certificates.” (ECF No. 70–1 at 3.) This transaction involved assignment of the Loan from BOA to Bank of America Commercial Mortgage Inc. Commercial Mortgage Pass Through Certificates, Series 2004–4 (“the Trust”). (ECF No. 76 at 4.) The creation of the Trust was memorialized in the Pooling and Servicing Agreement (“PSA”); the Trust named LaSalle Bank (“LaSalle”) as trustee. (ECF No. 76 at 4.) Effective October 12, 2004, BOA also directly assigned its interest in the Loan to LaSalle via an Assignment of Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (“First Assignment”). (ECF No. 60–6.)

The Loan would change hands again effective January 2, 2008, when LaSalle assigned “all of [LaSalle's] right, title and interest, of any kind whatsoever, including that of mortgagee, beneficiary, payee, assignee or secured party ... in and to the following: Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing” to Plaintiff Wells Fargo Bank (“Wells Fargo”) in its “Assignment of Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (“Second Assignment”). (ECF No. 70–3 at 2–3.) Wells Fargo's own “Instrument of Appointment and Acceptance of Successor Trustee” ² (“Instrument of Appointment”) reflected that the Second Assignment “fully vested [Wells Fargo] with all the rights, powers, duties, and obligations of the Trustee under the [PSA], with like effect as if originally named therein.” (ECF No. 76 at 4.)

In December 2007, WREC defaulted on the Loan, as the December 2007 payment was not made until February 2008. (ECF No. 56–1 at 6.) Again in August 2008, WREC failed to make its payment and thereafter did not make any further payments on the Loan. Id. Because of the default, the Loan was transferred to a special servicer, Midland Loan Services (“Midland”); ORIX Capital Markets (“ORIX”) later replaced Midland. Id.

In early 2009, WREC entered permanent receivership,³ and in December of that year the appointed receiver sold the Property at a receivership sale. Id. at 6–7. Wells Fargo successfully bid on the Property for a credit bid of ten million dollars; Wells Fargo's special servicer, ORIX, now owns the property through its own entity, Precision Park Rhode Island LLC. Id. at 7.

By October 2011, according to Wells Fargo, the current deficiency on the Loan was over twenty million dollars, “[including] a credit for the [ten million dollar] credit bid at the receivership sale.” Id.

II. PROCEDURAL HISTORY

Wells Fargo filed suit against the three Wassermans in their individual capacities in early 2010, arguing that WREC's default triggered full recourse liability ⁴ such that all three Wassermans were personally liable for the full amount of the Loan. (ECF No. 1.)

Before the Court today are the three summary judgment motions in this suit: first, Wells Fargo's Motion for Summary Judgment; second, the Wassermans' Motion for Summary Judgment; and third, David and Richard's Motion for Partial Summary Judgment as to their personal liability as individuals for the Loan. (ECF Nos. 56, 70, 72.) In Part IV, the Court will address the merits of each motion in turn.⁵

III. STANDARD OF REVIEW

Generally, a “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. When reviewing the evidence, the Court “must construe ‘the record in the light most favorable to the nonmovant and resolv[e] all reasonable inferences in that party's favor’ while safely ignoring ‘conclusory allegations, improbable inferences, and unsupported speculation.’ ” Colon–Fontanez v. Municipality of San Juan, 660 F.3d 17, 27 (1st Cir.2011) (quoting Carroll v. Xerox Corp., 294 F.3d 231, 237 (1st Cir.2002)).

Though the Court may construe the evidence in the nonmovant's favor, there is “ ‘no room for credibility determinations, no room for the measured weighing of conflicting evidence such as the trial process entails, no room for the judge to superimpose his own ideas of probability and likelihood (no matter how reasonable those ideas may be)’ on the cold pages of the record.” Rodriguez v. Municipality of San Juan, 659 F.3d 168, 175 (1st Cir.2011) (quoting Greenburg v. Puerto Rico Mar. Shipping Auth., 835 F.2d 932, 936 (1st Cir.1987)). The Court must constrain itself to determining matters of law. SeeFed.R.Civ.P. 56.

As is the case here, “[t]he happenstance that both parties move simultaneously for brevis disposition does not, in and of itself, relax the taut line of inquiry that Rule 56 imposes. ‘Barring special circumstances, the nisi prius court must consider each motion separately, drawing inferences against each movant in turn.’ ” Blackie v. State of Maine, 75 F.3d 716, 721 (1st Cir.1996) (quoting EEOC v. Steamship Clerks Union, Local 1066, 48 F.3d 594, 603 n. 8 (1st Cir.1995)). The same standard of review applies: “with cross-motions for summary judgment, [the Court] ‘must view each motion, separately,’ in the light most favorable to the non-moving party, and draw all reasonable inferences in that party's favor.” OneBeacon Am. Ins. Co. v. Commercial Union Assur. Co. of Canada, 684 F.3d 237, 241 (1st Cir.2012) (quoting Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st Cir.2010)).

IV. DISCUSSIONA. THE WASSERMANS' MOTION FOR SUMMARY JUDGMENT

In their Motion for Summary Judgment, the Wassermans assert that Wells Fargo lacks standing to enforce the Loan Agreement and that the Loan Agreement is illusory with respect to non-recourse liability. (ECF No. 70–1 at 1, 2.) Wells Fargo's response avers proper standing and denies the contract is illusory in any respect. (ECF No. 76 at 8.) From the formation of and exchange of documents surrounding the Trust, it is apparent that Wells Fargo, as successor trustee, has standing to enforce the Loan Agreement. (ECF No. 76 at 3.) However, there are genuine issues of material fact as to whether the contract is illusory because the scale of the recourse carve-outs may swallow the Loan's purported non-recourse nature.

i. Standing to Enforce the Contract

The Wassermans' main contention regarding Wells Fargo's standing to...